In this episode, I welcome a guest author from the UK to the podcast. Paul Skinner is the author of Collaborative Advantage: How collaboration beats competition as a strategy for success. Paul believes that collaboration is a worthwhile stance because most value is necessarily created by the customer (and other stakeholders), and co-creation of value with others can provide a winning strategy and a new path to organizational growth.
In addition to writing and speaking about Collaborative Advantage, Paul is the founder of the Agency of the Future, which helps clients create collaborative advantage to drive their own organizational success. He is also the founder of the social enterprise Pimp My Cause, which brings together marketers and good causes to create transformational pro bono projects for social good. In his book, Paul presents Collaborative Advantage as a radical alternative to the conventional goal of competitive advantage. Join this episode to gain an overview of Paul’s fascinating book.
Skinner, Paul. 2018. Collaborative Advantage: How collaboration beats competition as a strategy for success. London, UK: Robinson – an imprint of Little, Brown Book Group.
Today’s episode is called “Managing the Next 10,000 years.” That could be a tall order, since managing the next 10 years will be challenging due to expected global climate disruptions, but stay with me and you may be intrigued.
Civilization began the last 10,000 years in its pre-history phase, as humans, living in small bands, were still emerging from the last ice age (at its peak about 20,000 years ago) as the climate warmed. Ten thousand years ago the oceans were about 130-140 feet lower than today, and scientists tell us that the last land bridge between Europe and Great Britain was submerged only about 10,200 years ago to become marshland (and later, the English Channel).
It is worth noting that it was about 10-12,000 years ago, at the beginning of the Neolithic Revolution that the practice of management could be said to have started. The ‘managers’ loosely involved in the Neolithic Revolution could be thought of as the first early managers, although they may not have recognized themselves as such at the time. If we broadly define management as the practice of (1) organizing a group around one or more ideas, (2) acting on the idea(s) as a community or group, (3) reviewing the results, and (4) repeating steps 1-3, the Neolithic Revolution constituted some of the earliest efforts to do just that on a significant scale.
The Neolithic Revolution was the first historically verified agricultural revolution, resulting in the domestication of several types of cereal grains (e.g., barley, wheat, rice, millet) and livestock (e.g., goats, cows, water buffalos, chickens, horses) by about 8,000 years ago. It made settled agriculture possible. The first monarchies arose during this period in Sumeria (ancient Mesopotamia) and ancient Egypt. To put that in context, it was only about 5,500 years ago that wheeled vehicles began to appear (Bronze Age technology), along with canals and sailboats. Recorded history only started about 5,000 years ago in the form of Sumerian Cuneiform script on clay tablets. Unfortunately, we don’t have much reading material to inform us about these early events.
Capitalism came much later — in the 17th century — when merchants took the first steps to convert their excess capital into early factory production technology, and the industrial revolution was born. New sources of power (water, steam, electric, and internal combustion engines, in turn) served to automate manual labor and improve productivity through the early part of the 20th century. Additionally, new technologies were used to improve the productivity of factories and farms.
So, what was management all about in its first 10,000 years? In thinking about this, keep in mind that management practice is part of a society’s culture, and it utilizes widely understood methods. Frederic Laloux, in his book “Reinventing Organizations,” notes that early organizations were either largely tribe-like (his code red), or hierarchical and command-driven (code amber) — such as the Roman Empire or the Catholic Church. More recent organizations have tended to be financially-focused and machine-like (code orange), beginning with the early factories and continuing in today’s large corporations.
Whether it was organizing large irrigation systems (5,000 years ago), building the pyramids (4,500 years ago), Roman aqueducts (2000 years ago), or today’s corporations, the predominant idea of management has been to convert inputs (e.g., manpower and other resources) into outputs (e.g., completed works or activities) in a relatively efficient manner, consistent with the technology of the day. The desired result was a completed construction project, a well-run irrigation system, or a successful corporation. On its face, the first 10,000 of management was about accomplishing tangible and visible activities under direct management control. That still hasn’t changed.
My purpose in this episode is not to recount history, however, but to consider what we need (going forward) to ensure successful management of the future. In the time we have left in this episode, let’s consider what is needed to successfully manage the next 10,000 years.
Let me suggest a context that is likely to be true going forward:
First, organizations (collectively) will manage the next 10,000 years. Only organizations (business, government and non-profit) have enough resources, power, and control to do the job.
Second, organizations will be nested and intertwined with other systems, large and small. For instance, organizations contain individuals, yet each individual exists within a family, a family exists within a neighborhood, a neighborhood exists within a community, a community exists within a state and nation, and a nation exists within a global community of nations. Instability within one of these layers often affects the others in various ways.
Third, management practice (by its nature) is socially constructed and is subject to change. Broadly speaking, management is part of the cultural tapestry of society, and culture has enabled human learning and advancement over the centuries. In short, Homo sapiens have been able to dominate their environment by building up successive layers of culture. The mammal with an advanced culture now dominates the landscape. That same mammal is now managing its environment.
Given the above context, can mankind successfully navigate the next 10,000 years and create a sustainable future? Maybe, but it is important to acknowledge that today’s dominant management paradigm (let’s call it “unconscious capitalism”) has created the world we now live in, and that world seems to be spinning out of control.
The science of cybernetics, which deals with systems and their control, offers some instruction as to why the world seems to be spinning precariously. The first law of cybernetics (Ashby’s law of requisite variety) states that “if a system is to be stable, the number of states of its control mechanism must be greater than or equal to the number of states in the system being controlled.” Considering the constellation of global systems, with new technologies ever-increasing the variety of states in the system, today’s control mechanisms are unable to keep pace.
Two clear paths appear to be available to stabilize our world and bring it under intentional management control. The first possibility involves the expansion of the regulatory role of the government to provide greater control over organizations. We could point to some heavy-handed or authoritarian regimes around the world attempting to follow this path. Yet that path is generally unavailable to free societies.
A second path is available and is more congenial to open and democratic administrations. It involves instilling a culture of self-regulation and self-management within each organization in the system so that while going about its activities, it confines itself to the use of positive, higher-order values that accrue benefits to both the organization itself and the greater common good. You may be familiar with the movement called “conscious capitalism.” In a similar vein, this is what Management by Positive Organizational Effectiveness is all about. Regular listeners to this podcast will be familiar with this new approach.
Using Management by Positive Organizational Effectiveness, the task is no longer limited to converting inputs to outputs using objectives specified by management. Rather, the task is to convert inputs into meaningful outcomes within the environment. It is achieved by converting inputs to outputs (on the supply side), while also converting outputs to outcomes (on the demand side). Instead of responding to the arbitrary financial mandates of top management, each organization is reoriented to positively serve the needs of its environment, where customers and other stakeholders live. In this scenario, effectiveness is verified by observing the exchange of benefits between the organization and its environment. First-principles indicate that the exchange of positive outcome-level benefits is necessary for an organization to survive and thrive (and benefit the common good).
Within the context of Management by Positive Organizational Effectiveness, the goal of every organization is the same, that is, to be effective within its environment while improving the whole. This goes beyond the management of visible activities under direct management control (as in the past) to encompass meaningful outcomes that occur in the environment, yet outside of management’s direct control.
It is only with the achievement of meaningful outcomes in the environment that we can be sure that the organization will survive and thrive while improving its surrounding environment over time. We could call this new paradigm “positive capitalism” because it seeks to eliminate the negative aspects of today’s capitalism. Management by Positive Organizational Effectiveness provides a kind of embedded self-regulation and self-management that, when practiced widely, could keep the world from spinning out of control, and help manage the next 10,000 years successfully. I would argue that every organization has a choice to make going forward, either to be part of the problem or part of the solution.
For more information on how to reorient your organization for the next 10,000 years, pick up a copy of my 2017 book, entitled: Become Truly Great: Serve the Common Good through Management by Positive Organizational Effectiveness.
Bureaucracy was an innovation in the mid-1800s, as the world changed from a traditional society to one driven by a new sense of rational-legalism, largely driven by the Protestant ethic. Max Weber, a German sociologist, described the times in his book, The Protestant Ethic and the Spirit of Capitalism (1904, in German; 1930, English translation). Weber notes that it was a change in thinking that led to this new world. Today, the field of management again faces the need for a fresh approach if the world is to solve its current set of challenges.
Today the podcast has reached a milestone, at episode 100. Starting back in February 2016, it has taken a little over 3.5 years to get to this point. I hope you have been one of those who have come along on the journey.
I am calling today’s episode, “Your mission, vision, values,
and offerings … in 10 minutes.” That’s a pretty tall order, so let’s get
started.
I am not a big fan of mission and vision statements that are
found in most organizations. Why? Because I have always felt that they are frequently
untethered to first principles. Let me explain.
Here at The Age of Organizational Effectiveness podcast, we have an unconventional view of what an organization should be about, whether it is a business, a government agency, or a nonprofit. You see, organizations are not all that different in their underlying rationale. From first principles, we know that for an organization to survive and thrive, it must exchange benefits with its environment. In other words, an organization must serve its environment, so that it can be rewarded in return. The more effective and organization becomes, the more benefits it will exchange with its environment. In short, the goal (or meta-goal) of every organization is the same, that is, to be effective within its environment while improving the health of the system as a whole. Each organization has the freedom, of course, to determine where it will serve and what it will offer its environment as part of its service to it. With that in mind, it uses positive values to improve and sustain the health of the organization and its environment as a whole.
Which brings us to your mission, vision, values, and offerings. Given first principles, we can formulate them in the next 10 minutes. Here is a suggested format:
Mission: Our mission is to serve our environment effectively using positive values in order to make the world a better place. The environment that we have chosen to serve is ____________________. Our people are free to decide for themselves how best to serve our environment every day.
Vision: Our vision is a world where our offerings are
integral to the success of _______________, both now and in the future.
Values: We embed positive values in our offerings and in all
that we do so that they provide benefits that build up the environment that we
serve. Our top 5 values are:
_________
_________
_________
_________
_________
Offerings: Our offerings embody the positive values and unique
attributes we seek to cultivate in order to serve our environment effectively. Our
offerings are the instruments through which we exchange benefits with our environment,
thus allowing us to survive and thrive, along with our surrounding environment.
Our key offerings are:
____________________ for __________________
____________________ for __________________
____________________ for __________________
…
Today I have provided a suggested format for crafting your
mission, vision, values, and offerings. It enables the creation of a first draft
quickly, but you can revise and refine the framework as needed over time. It is
a good way to get your entire organization involved in crafting a path toward the
future.
For more information on Management by Positive Organizational Effectiveness and the types of tangible and intangible benefits that are exchanged with your environment, please refer to my book referenced in the show notes (below).
Charles G. Chandler, Ph.D.
Reference:
Chandler, Charles G. 2017. Become Truly Great: Serve the
Common Good through Management by Positive Organizational Effectiveness.
Powell, OH: Author Academy Elite.
For all practical purposes, the year 1800 was the beginning of the Anthropocene, the age when mankind embarked upon the industrial revolution and great acceleration in economic and population growth began. Yet in a new theory (BioScience, 2018), some conservationists now say that the global demographic and economic trends that have resulted in unprecedented destruction of the environment over the last two centuries are now creating the conditions necessary for stabilization of human populations and a possible renaissance of nature.
Drawing reasonable inferences from current patterns, these conservationists suggest that a hundred years from now, the Earth’s population will be between 6 and 8 billion people (comparable to the 7 billion today), very few will live in extreme poverty, 70%–90% will live in towns and cities, and nearly all will participate in a globalized, market-based economy. Further, two centuries from now, the population could be half what it is today and the long-cherished goals of a world where people respect and care for nature may be realized, especially if we act now to foster this eventuality. This view has been called the “bottleneck to breakthrough” stance. Of course, one significant problem with this hopeful narrative is that it is unlikely that we will have 100 – 200 years to get this right before the global effects of the climate crisis abound.
Hopeful narratives have emerged in other quarters as well. Professor Adam Frank of the University of Rochester, writing recently in the Washington Post, suggests the need to reframe the debate surrounding the climate crisis, not to let us off the hook, but to offer a way forward beyond today’s entrenched positions. Currently, the scientific narrative describes humans as an apex species of sorts that has overrun the planet and caused significant degradation in the atmosphere (elevated CO2), hydrosphere (acidification of the oceans, sea-level rise, increased floods, and droughts), and biosphere (species extinction). A ‘blame’ narrative of this sort has generated push back and denial from various quarters, particularly among many business leaders and conservative politicians. Professor Frank noted that there is “a very different story we can tell, one that recognizes climate change not as a marker of shame but as a story of an astonishing success that has led humanity to a moment of great peril, yet also of profound possibility.”
The central point here is that climate change is the unintended
result of our species’ thriving. In the new narrative, humans are not cast
as a greedy scourge on the Earth but simply the latest experiment in “planetary-scale
evolution.” It is natural that any species that flourished to this degree would
have tapped readily-available fossil fuels on a large scale — and in so doing would
have eventually degraded global ecosystems. While it took a century or two for
the downside of carbon-based fuels to manifest itself fully, the argument goes,
now that we have understood it, we must mobilize to change course quickly and move
past this bottleneck.
We should realize that the world community has addressed a similar,
albeit smaller, problem in the past. The ozone hole of the late 1980s was caused
by a class of industrial chemicals called CFCs which destroyed ozone in the
upper atmosphere. The solution was the adoption of the Montreal Protocol, signed
by many nations of the world in 1989. Now, 30 years later, scientists know a
lot more about the ozone layer and the ozone hole is getting smaller; it is expected
to heal entirely by 2050. If global cooperation had not banned CFCs for the
last 30 years, the ozone hole over Antarctica could be 40% greater by now.
Today’s global greenhouse gas problem is more difficult to
solve due to the widespread use of fossil fuels as the basis for modern
civilization. The climate bottleneck is the result of increasing CO2 and
methane levels in the atmosphere derived from a wide variety of sources, but
predominately from burning carbon-based fuels throughout the world. There are also strong vested interests (e.g., energy
companies), whose business models could be hobbled if fossil fuels are phased
out, or even significantly reduced.
Which brings us to an apparent crisis of legitimacy among today’s
prominent institutions. For the first
time in decades, their influence, their ability to lead, and even their right
to exist, are being questioned. According to one of the world’s leading
consulting firms (PwC 2019), the causes of this legitimacy crisis are related to
five basic challenges affecting every part of the world:
Trust: There is declining confidence in the prevailing institutions that make our systems work.
Asymmetry: The wealth disparity and the erosion of the middle class
Disruption: Abrupt technological changes and their destructive effects
Age: Demographic pressures are being experienced as the average life span of human beings increases and the birth rate falls
Populism: The growing rejection of the status quo, with associated nationalism and global fracturing
Because of their role in maintaining the status quo, many existing organizations have been linked to the multiple crises that we are now facing. But if we take the more hopeful view, we are currently viewing the world only from an uncomfortable bottleneck. Where organizations have contributed to such problems, organizations can solve them. But hold on, this is not just a legitimacy crisis for large organizations, even small and medium-sized organizations can be viewed as illegitimate if they ignore a global crisis. The future is likely to be path-dependent, and a positive path is certainly not a foregone conclusion. Organizations large and small need to act together to ensure that we emerge from the bottleneck into a world that continues to be viable.
If you are a manager, you may find yourself trying to
justify your stance on global issues to your stakeholders. We must all ask
ourselves whether we are part of the problem or part of the solution. It’s a
question of legitimacy, especially during a crisis. If you find yourself in
this situation, let me suggest that a new management approach offers a way forward
toward a new sense of legitimacy for your organization.
The basic idea of traditional management is that each organization, in line with its capabilities, seeks to transform inputs into outputs in an efficient manner. This two-level, input to output model has been the basis for a vast constellation of organizations in business, government, and nonprofits sectors, but the downside of this approach is in full view today: (1) natural systems have been significantly degraded as the tragedy of the global commons is writ large, and (2) workers have little motivation and agency to address external issues through innovation. Yet we can no longer ignore the negative externalities that are occurring in the global commons. The traditional management model means that the health of the environment continues to be ratcheted down because each individual organization has little concern for its net impact on the environment. The fault is in the traditional input to output model that is organization-centric and views efficiency as the highest good. Fortunately, the traditional management model is socially constructed and can be changed. But first, let’s examine the traditional model more closely – it is composed of two levels.
Level 1 (input narrative). The practice of management has a rich history that began hundreds of years ago. As early as the year 1397, the Medici Family of Florence Italy utilized double-entry booking to set up rudimentary banks across Europe. It was Luca Pacioli who first described double-entry bookkeeping in his text of 1495, and the practice is now a central tenet of accounting in modern organizations. The purpose of accounting is to maintain solvency and determine profit (or surplus) for the period under review. Accounting is about input management and produces a Level-1 narrative that describes how well an organization is doing in financial terms. It focuses on profit (or surplus), a narrative that has been deeply embedded in our culture since its beginning over 500 years ago. While the level-1 narrative surrounding the management of inputs is necessary, it is insufficient to provide responsible management decision support well into the future.
Level 2 (output narrative). The management narrative at level 2 is about the efficient production of outputs, which was described by Frederick Winslow Taylor in his 1911 book, Scientific Management. In output production, sensemaking is based on what is directly within management’s control. Inputs at level 1 are converted into outputs at level 2 by a process. The traditional approach is organization-centric, largely concerned with how the organization can achieve its output objectives in an efficient manner. At level 2, the highest good is efficiency. Many of the well-known management techniques, such as management by objectives, reengineering, Six Sigma, agile teams, and OKRs are primarily about output management and associated improvements in efficiency. While a level 2 narrative surrounding the production of outputs is necessary, it is not sufficient to provide responsible management decision support well into the future.
This podcast has advocated a new approach to management called Management by Positive Organizational Effectiveness. It adds two additional levels to the traditional model in order to focus on external effectiveness rather than internal efficiency, thus providing a more holistic view of the health of the organization and its environment. It is based on an input to outcome model, where four levels of narrative are stacked one on top of the other to fully address the categories of results that are relevant (inputs, outputs, outcomes, impacts). The ‘positive’ feature of Positive Organizational Effectiveness indicates that the organization will engage in self-regulation through the use of positive values in all that it does. Today I want to ask you to consider adding to your narrative stack to fully address the needs of the future.
Levels 3 & 4 (outcome & impact narratives). Level 3 outcomes occur outside the organization in the external environment. In this expanded model, a results chain connects inputs to outputs on the supply side, then outcomes to Impacts on the demand side. If the chain breaks, it is normally at the interface between supply and demand, that is when trying to convert outputs to outcomes. Expected external outcomes do not materialize unless demand-side actors are first attracted to investigate the available outputs. Meaningful outcomes are verified by the observation of the behaviors of uptake, adoption or use on the part of demand-side actors in response to the outputs on offer. The outcomes at level 3 are inherently meaningful because they signify actual benefit exchanges between the organization and its environment. A key point is that they can be observed directly in the field. Careful reporting of the level 3 narrative surrounding demand-side outcomes is a valid way to provide responsible management decision support based on immediate feedback. Over time, a level 4 impact narrative will also emerge, based upon longer-term effects as expected outcomes accumulate and spread throughout the environment.
A focus on level 3 and level 4 narratives offers significant benefits for projects, programs, and organizations more generally, as well as the wider world. It provides meaningful and timely evidence for decision support while sustaining or improving the health of the organization and its environment as a holistic system. This approach offers demand-side validation of an organization’s portfolio of offerings (whether in business, government or nonprofit) and thus provides verification of organizational effectiveness (the highest level of performance) by direct observation in the field. This is the first approach to do so.
Traditional management practice at level 1 and level 2 can
be characterized as “managing for outputs, valuing efficiency as the highest
good.” Very little meaning is derived from the successful delivery of outputs
alone, however, because the process remains largely disconnected from
considerations of environmental context and environmental response. The new
approach advocated here at level 3 and level 4 can be characterized as
“managing for meaningful outcomes, valuing positive organizational
effectiveness as the highest good.” It offers a better way to manage by
creating a path to more effective organizations, a more meaningful technology
for human accomplishment, and a better world.
From our current vantage point (i.e., within the climate bottleneck), it is easy to believe that the world is spinning out of control due to the expanding complexity of global systems and the inability of control mechanisms to keep up. A more hopeful narrative is more likely, however, if organizations strive for Positive Organizational Effectiveness. The reason is that the new model includes self-regulating and self-managing mechanisms that serve to moderate global systems. The first law of cybernetics (Ashby’s law of requisite variety) states that to successfully control a system, the control technology must be able to address the full variety of states found in the system. The traditional 2-level input-output model offers no meaningful support for global system control beyond the organization itself. It is guided only by level 1 and level 2 narratives, which lack meaning on the global front. Let’s call it ‘last-century technology’ that has created the imperiled world we now live in. It ignores the health of the surrounding environment because it is an inward-looking model that ignores external environmental effects. It treats human labor as a cost because it is only concerned with efficiency. On the other hand, a focus on level 3 and level 4 narratives serves to improve the health of both the organization and its external environment. If a significant number of organizations were operated in this way, the health of global systems could be ratcheted up over time.
In today’s episode, I have tried to show how we may be viewing today’s adverse situation from the limited vantage point of the climate bottleneck. Yet we cannot stand idly by in hopes of a breakthrough just over the horizon. Let’s all take steps in our own way to be sure that a more sustainable world arrives without fail. The spread of Management by Positive Organizational Effectiveness can offer a new sense of legitimacy and effectiveness to organizations enlisting in the struggle.
Charles G. Chandler, Ph.D.
References:
Sanderson, Eric, Joseph Walston, and John Robinson. 2018. “From Bottleneck to Breakthrough: Urbanization and the Future of Biodiversity Conservation.” BioScience, June 2018: 412-426.
Blakemore, Erin. 2016. “The Ozone Hole Was Super Scary, So
What Happened To It?” Smithsonian.com. January 13, 2016.
Frank, Adam. 2019. “Reframing climate change as a story of human evolutionary success.“ Washington Post. October 15, 2019.
Chandler, C.G. 2017. Become Truly Great: Serve the Common Good through Management by Positive Organizational Effectiveness. Powell, OH: AAE.
Sheppard, Blair & Ceri-Ann Droog. “A crisis of legitimacy.” Leadership: 96, June 5, 2019. PWC, Autumn 2019.
This month, August 2019, the Business Roundtable issued a new overall statement of purpose for a corporation, signed by the CEOs of almost 200 of the largest US corporations. This is a big deal because the previous 1997 statement from this same group had created a major problem by elevating shareholder value as the prime purpose of business. The new statement broadens the corporate commitment to all stakeholders, including customers, employees, suppliers, local communities, and shareholders in order to set an improved tone for business activities going forward.
Let me include the statement here, it’s not long.
Business Roundtable Statement on the purpose of a corporation
Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.
Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth.
While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:
–Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
– Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
– Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
–Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
– Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.
Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities, and our country.
[Issued August 19, 2019, by the Business Roundtable and signed by almost 200 CEOs]
Significance. Stephen Pearlstein, writing in the Washington Post this month, notes that “what most distinguishes America’s brand of capitalism is the widely held belief that the first duty of every business is to maximize value for shareholders. The benign version of this credo is that there is no way to deliver maximum value to shareholders over the long term without also satisfying the needs of customers, employees and the society at large. But in its more corrosive application — the one that is inculcated in business schools, enforced by corporate lawyers and demanded by activist investors and Wall Street analysts — maximizing shareholder value has meant doing whatever is necessary to boost the share price this quarter and the next.” Over the years, this approach has justified corporate efforts that have mislead or defrauded customers, squeezed workers & suppliers, reduced or avoid taxes, but showered stock options on executives. It has been the ruthlessness, the greed and inequality that most people find distasteful in American capitalism, and such attitudes are rooted in the persistent notion that maximizing shareholder value is what business is all about.
Which is why the new statement by the Business Roundtable disavowing shareholder primacy is important. Pearlstein further notes that “in the Roundtable’s new formulation of corporate purpose, delivering value to customers, investing in employees, dealing fairly and honestly with suppliers, supporting communities and protecting the environment all have equal billing with generating long-term value for shareholders.” The statement rejects the whole idea of “maximizing” the value benefiting one stakeholder over all the others. Instead, it calls for balance and compromise in serving all company stakeholders.
Despite the upbeat statement from the Business Roundtable, a blanket statement of purpose for all corporations remains contested territory. Reaction from opposing quarters was swift, as the Council of Institutional Investors expressed concern that the statement undercut managerial accountability to shareholders because of their ownership rights within the corporation (Bertsch, 2019).
Let me stop here and note that, as has been mentioned before on this podcast, shareholders do not own a public corporation. Shareholders only have a claim to some of the residual assets of the company via stock ownership. The related argument for shareholder primacy (among all stakeholders) also falls apart when the following is considered: 1) shareholders do not have the right of control over corporation assets; the Board of Directors has that right. Similarly, 2) shareholders do not have the right to help themselves to a firm’s earnings; they only receive dividends when the Board of Directors sees fit. The claim that shareholders own the corporation is empirically incorrect from both a legal and an economic perspective (Stout, 2002). No-one owns a public company; it owns itself. As the British say, it’s like the river Thames, nobody owns it (Kay, 2015).
Yet it was the political and economic landscape of the 1980s that enshrined shareholder value maximization as the main purpose of a corporation. The decades-long influence of that narrative cannot be easily put aside. To review how we got here, the period after World War II until the late 1970s was characterized by a “retain-and-reinvest” approach to resource allocation by major U.S. corporations. During this period corporations tended to retain earnings and reinvest them to increase the corporation’s capabilities. This served to benefit the employees who had helped improve firm competitiveness and provided workers with higher incomes and greater job security. It also gradually increased shareholder value as firms grew. The “retain-and-invest” pattern gave way in the late-1970s to a “downsize-and-distribute” regime where corporate efficiency became an overriding goal, justifying layoffs, asset sales, and other cost reduction approaches, followed by the distribution of freed-up cash to financial interests, particularly shareholders (Lazonick, 2014). The downsize-and-distribute approach tended to strip value from a firm and contributed to employment instability and income inequality inside the firm because the firm’s ability to be productive in the future was weakened. During the “retain and invest” regime, workers were relatively happy because they felt that their organization was keeping their interests in mind. With the advent of “downsize and distribute,” however, stresses built up around the social contract between management and workers (Chandler, 2017).
There was likely more than one cause for the adoption of the downsize-and-distribute regime during the 1980s. Not insignificant was the corporate raider model first employed by activists such as Carl Icahn, who employed asset-stripping techniques in the 1985 hostile takeover of TWA. One example was that in 1991 Icahn sold TWA’s prized London routes to American Airlines for $ 445 million. Icahn later took TWA private and made a personal profit of $ 469 million while leaving TWA with debt of $ 540 million (Grant, 2006). Partly in response to these techniques, management of some publicly traded corporations adopted countermeasures designed to make corporate raids and hostile takeovers less attractive, including legal poison pills, C-suite golden parachutes, and debt level increases on the balance sheet. Even after such measures, however, activist investors or hedge funds could buy as little as 10% of the stock of a public company to argue for a seat on the board and pressure management to increase returns to shareholders. While hedge funds have claimed that their efforts create a more efficient industrial structure and a better allocation of capital overall, it is doubtful that history will be kind to the downsize-and-distribute regime, since it strips away assets and hampers a firm’s ability to produce in the future.
Another trend associated with the practice of shareholder value maximization has been the widespread increase in executive compensation, largely influenced by the popularity of agency theory — championed by Milton Friedman and the Chicago School of Economics. Agency theory holds that C-suite executives are agents of the owners and need to be heavily incentivized to be sure that their interests are aligned with those of the owners (who are equated with the shareholders). Over the years, friendly boards have increased CEO compensation to extraordinary levels (tens of millions of dollars) by benchmarking with other firms that were doing the same (Whoriskey, 2011) . Starting with the 1980s, recent decades have seen a meteoric rise in executive compensation in the USA relative to the average worker’s wage. This is an example of the perverse incentives that operate under agency theory, due to the elevation of the inappropriate goal of shareholder value maximization. Milton Friedman’s view that the sole social responsibility of the firm was to maximize profits (Friedman, 1970)—leaving ethical questions to individuals and governments—became dominant in both finance and law by the 1980s. It also provided the intellectual foundation for the “shareholder value” revolution.
A prominent view during the period was that the invisible hand of the market remained a dominant force in the economy. Conservatives, such as Friedman (and Alan Greenspan at the US Federal Reserve after 1987), argued that the market could be relied upon to regulate the economy and that government intervention is unnecessary and undesirable. In their view, government was the problem and needed to get out of the way. While it has often been taken for granted that an organization’s purpose is to produce economic value, and although economic value can often add to social value, sometimes it does not. According to Mary Ann Glenn (2016) of the Academy of Management, this disjunction raises the question of meaningfulness, which can be viewed as an organization’s expression of purpose, values, or worth. It should involve a sense of significance that goes beyond material success or profitability by highlighting how an organization expects to play a larger and more positive role in the world (AOM, 2015)
No matter which theory of business purpose you ascribe to, we all can agree that corporations have a central role in modern life. They offer goods and services. They are places to work. They are force multipliers, allowing individuals to achieve purposes much larger than they could accomplish by themselves. The best corporations help add meaning to our lives. Truly great ones occupy an important niche in their environment and act in ways that benefit the common good. That’s why the revised statement of purpose for corporations issued by the Business Roundtable represents a more hopeful note on what they can become.
References:
Bertsch, Ken. 2019. “Council of Institutional Investors Responds to Business Roundtable Statement on Corporate Purpose.” Council of Institutional Investors, Washington, DC. August 19.
Chandler, Charles G. 2017. Become Truly Great: Serve the Common Good through Management by Positive Organizational Effectiveness. Powell, OH (USA): Author Academy Elite.
Friedman, Milton. 1970. “The Social Responsibility of Business is to Increase Its Profits.” New York Times Magazine, September 13.
Glynn, Mary Ann. 2016. “Making Organizations Meaningful – Academy of Management Annual Meeting 2016.” AOM.org.
Grant, E. X. 2006. “TWA — The Death of a Legend.” St. Louis Magazine, July 28, online ed.
Kay, J. 2015. “Shareholders think they own the company — they are wrong.” Financial Times, November 10, online ed.
Lazonick, W. 2014. “Profits Without Prosperity.” Harvard Business Review, September 2014, online ed.
Pearlstein, Stephen. 2019. “Top CEOs are reclaiming legitimacy by advancing a vision of what’s good for America.” Washington Post. August 19 (online edition).
Stout, Lynn A. 2002. “Bad and Not-so-Bad Arguments for Shareholder Primacy.” Southern California Law Review75: 1189-1209.
Whoriskey, P. 2011. “Cozy relationships and ‘peer benchmarking’ send CEO pay soaring.” Washington Post, October 3.
In this episode, I am joined by Dolores Hirschmann as we discuss the IDEA method for finding clarity in business. Dolores is a STRATEGIST, COACH, and BUSINESS OWNER. Her focus is on helping clients find their ‘core idea’ on which to base their business (or any other initiative). Her clients have become speakers and authors to take their message to large audiences on a TEDx stage or beyond. She works through group coaching, workshops, one-on-one coaching, as well as public speaking. Dolores is a CTI certified and ICF accredited coach and has a business degree from the Universidad de San Andres, Argentina. Originally from Buenos Aires, Dolores speaks fluent Spanish, English, and French and lives in Dartmouth, MA with her husband and four children.
This episode continues our occasional series in which we visit a business to try to understand how it works. Today, our guide will be Mandy Barton who is President of Barton Logistics. Mandy shares an interesting story which serves as a window into the movement of freight by truck, rail, and air in the USA. Barton Logistics is a market maker in freight and sits at the intersection between its customers (and their supply chains), its carriers (who operate one or more large trucks, or other vehicles), and its trading partners. The business is physically located in central Texas, but it could have been located anywhere since it operates largely as a call center using the telephone, email and the Internet.
Mandy Barton has been involved in the trucking and third-party logistics (3PL) industry for 23 years. She founded Barton Logistics in the dining room of her parent’s home in 1997 and currently serves as its President/CEO. Her degree is in Economics from the University of Texas at Austin. She is the author of the self-development book, Step One: Jump! published in 2016 and has an active coaching practice.
In this episode, I talk about the need to reinvent management and suggest a way forward to achieve it. I like to think of management as a technology that makes all other technologies productive (if done right). Yet, today’s dominant approach to management (command & control) relies upon an outdated input-output model (developed during the industrial revolution) that values efficiency as the highest good and frequently creates negative side-effects among internal actors and within the environment. Today, I will describe a more meaningful input-outcome model for management that values positive organizational effectiveness as the highest good and serves to sustain or improve the health of both the organization and its environment as a holistic system.
How I arrived at my view that management needs to be reinvented.
In
the 1980’s, I found myself in New Delhi India, working for the World Health
Organization (WHO) in the regional office for SE Asia. It was during the UN’s International
Drinking Water Supply & Sanitation Decade, 1981-1990 (better known as the UN
Water Decade). At the time, I was the project manager for WHO/UNDP’s Advisory Services
Project that was part of the Decade. My job entailed visiting countries in the region
to see what was going right and what was going wrong with the Water Decade and helping
participating government organizations improve their programs.
Government agencies in participating
countries thought they knew what end users needed, since they had been
providing water and sanitation services for decades. They said they just needed
more funds to build more facilities. But completed facilities were frequently
in disrepair, and others were not utilized by end users for the purposes
intended due to a variety of reasons.
The goal of the UN Water Decade was
to expand the ‘coverage’ of safe water and adequate sanitation in participating
countries. The focus on coverage (i.e., access to services) turned out to be an
unfortunate choice because the goal typically resulted in a numbers game in
each country, where success was measured in rural areas, for instance, by how
much of the population was covered with hand pumps & latrines. If rural users
were within a few minutes’ walk from a hand pump, they were deemed to have
access to safe water supply. The fact that some of the hand pumps were in
disrepair and others were not being used for their intended purposes was not easily
reflected in the system.
Much of the problem was due to a
conceptual gap between the planners and the end users. They didn’t understand
each other. The planners were delivering engineering solutions based on their technical
training, but the adoption and use of their solutions was hampered in
traditional societies by the embedded patterns of thought found in the social
and cultural narratives of the past. Later in the UN Water Decade, WHO urged
governments to look beyond coverage, to ensure the continued functioning
of the completed facilities and their utilization by end users (for the
intended purposes).
This example highlights a
fundamental problem at the heart of traditional management approaches, that is,
what counts as meaningful accomplishment. As we will see, the overall program
goal for the UN Water Decade was set at the wrong level (a largely meaningless supply-side
output which focused on ‘coverage’), which then drove what was delivered during
implementation, and the subsequent evaluation of completed activities. Traditional
management does not distinguish between arbitrary output-level
objectives and meaningful outcome-level objectives during the objective
setting process, and later during program implementation and evaluation. This
problem was baked into management science at the beginning and has not been
corrected since. Historical examples of this fundamental problem can be found
in the Scientific Management movement
of Frederick Winslow Taylor (Taylor 1911), the Management by Objectives
approach pioneered by Peter Drucker (Drucker 1954), as well as some more recent
management remedies such as OKRs — or Objectives & Key Results (John Doerr
2018).
What’s wrong with traditional management?
While
Gary Hamel (of the London Business School) has called management “the
technology of human accomplishment,” traditional management approaches often fail
to produce meaningful results. As a technology, management needs to be reinvented
because it remains organization-centric and locked into a largely meaningless input-output
model that values efficiency as the highest good.
Early
theories viewed organizations as “rational systems”– social machines
of a sort, meant for the efficient transformation of material inputs into
material outputs (Scott 1987, 31-50). Organizations were often depicted as largely
closed entities separated from the surrounding environment. Inputs arrived at
factory gates, engineers determined what technologies to use for processing, and
outputs evaporated off loading docks, all in support of built-in assumptions
(Suchman 1995, 571).
In the
traditional input-output model, an organization extracts resources from its
environment as inputs, internally processes the inputs to produce outputs, and
returns to the environment the outputs it produces and the waste products it
has created. While this model has been the historical basis for organizations
large and small, it generally fails to produce meaningful and timely evidence
for management decision support, and frequently creates negative side-effects
among internal actors and within the environment.
Traditional management is so familiar
that it is hard for most people to conceive of anything else. Its features
include:
Top down, command & control [originally designed
for repetitive manual work]
Objectives focused primarily on output production and
cascaded down from the top of the hierarchy to the lower levels
Largely authoritarian & bureaucratic in nature
Efficiency is the highest good (an isolated and largely
closed system)
Input – output model (organization centric), within
management’s full control
Requires objectives to be ‘clear,’ but virtually any
objective is acceptable
Positive values are largely optional (little self-regulation)
Intermediation services (balancing supply &
demand) are performed by ‘the market’ utilizing financial & economic
benefit exchanges between relevant actors
Waste products are returned to the environment
In the traditional approach, managers
at the top of the hierarchy identify goals and develop strategy, sending
directives to the lower levels. This approach conforms to the early Goal Model
of organizational effectiveness, wherein an organization is believed to be
effective if it accomplishes its stated goals (set by management). Despite its
continued widespread use, the Goal Model has been debunked by scholars. Only
some goals are relevant to effectiveness, and even when a stated goal is
achieved, an organization may not be judged effective (Chandler, 2015). Goals
set at the top by the executive team simply make the organization responsible
to the top of the hierarchy for its approval rather than to the customers or
end users that need to support the organization if it is to be successful. This
is not a good place to be.
EFFECTIVENESS IS ABOUT ACHIEVING MEANINGFUL OUTCOMES
For much of my career I was involved
in projects and programs in international development, having helped design and
implement over 800 initiatives worth more than US$ 80 billion in countries
around the world (not counting the Water Decade).
A
few years ago, I began a survey of the literature on organizational theory to
see what it had to say about the concept of organizational effectiveness (OE). Based
on my international development experience, I thought I knew what effectiveness
was in projects and programs, but I was shocked to find that organizational
scholars could not identify a verifiable concept of OE, and their field was in
disarray. There were at least five prominent models of OE (including the Goal
Model), but none could be objectively verified in the field (Cameron 2005).
Despite the lack of a verifiable model, scholars agreed that OE was the highest
level of organizational performance and was expected to be the capstone concept
that brought other aspects of organizational theory together into a unified
whole (assuming a verifiable concept of OE could be found).
Currently, organizational
effectiveness is viewed by many scholars as an enigma (Cameron 1981) with
characteristics of a wicked problem (Zammuto 1982). The main issue continues to
be how to define the concept of effectiveness because we need to know
effectiveness when we see it. R.L. Kahn wrote in 1977 that “To be effective is
merely to have effects. The problem is what effects accord with the concept of
organizational effectiveness?” (Kahn 1977). For me, achieving organizational
effectiveness is about managing for meaningful outcomes, that is, achieving contextual-specific
effects that can be observed directly in the field to provide a relevant and
favorable demand-side response.
MANAGING FOR MEANINGFUL OUTCOMES
Management technology needs to put
aside the traditional (and largely meaningless) input-output model to
adopt a more meaningful input-outcome model that values organizational effectiveness
as the highest good and serves to sustain or improve the health of the
organization and its environment as a holistic system. This is what “managing
for meaningful outcomes” is all about.
Let me define the two terms that must
work together to provide “meaningful outcomes.” ‘Meaningful’ refers to relevant
contextual-specific effects observed in the field that can serve as markers for
the types of outcome(s) we seek. ‘Outcome,’ although a common English word, has
two, somewhat different meanings. One is “the final result, or how a thing
turns out.” This is not the one I am using. The second meaning of ‘outcome’ is
“an effect caused by an antecedent.” It is this one that I associate with
meaningful outcomes, i.e., an effect that results from a stimulus that
logically precedes it.
Managing
for meaningful outcomes requires a more comprehensive model than the
traditional input-output model that has only two levels and acts as a largely
closed system. Since the late 1960s, “open system” theories (Scott,
1987: 78-92) have reconceptualized organizational boundaries as porous and
problematic (Suchman 1995, 571). In this context, consider the four-level model
(input-output-outcome-impact) available from the ‘logical framework’ of
Results-Based Management (RBM) (Asian Development Bank 2006). It has been used
in international development since the 1960’s, beginning in USAID. The four levels
comprise a hierarchy of goals or objectives within the model. This hierarchy was
originally designed to serve temporary organizations such as projects and
programs but has been extended recently in the Outcome-focused Model (OFM) to
serve organizations more generally (Chandler 2017, 83). While the new model uses
the hierarchy of objectives from results-based management, it improves upon it
by dividing supply from demand. In the OFM, the supply-side input & output
levels are within the control of management, while the demand-side outcome
& impact levels are outside the control of management (in the environment).
This creates a truly open system model of organizational performance by giving
meaning to both environmental context and environmental response.
Managing
for meaningful outcomes incorporates a demand-side test of effectiveness for an
organization’s offerings. For meaningful outcomes (and effectiveness) in
temporary or permanent organizations, actors in the environment must be
attracted to the organization’s offerings (outputs), then initiate the
behaviors of uptake, adoption or use (meaningful outcomes). For instance, an
agricultural extension project could be judged effective only if the local
farmers first adopt and use a new package of farming techniques viewed as key
to project success. Without the farmer’s favorable response, the results chain
fails, and the project is judged ineffective. Of course, it also helps to
involve the farmers initially at an early stage of project design to provide
feedback on the available options.
In
managing for meaningful outcomes, the focus is on the outcome level because the
link from outputs to outcomes is the weakest link in the results chain
(Chandler 2017, 73). If expected outcomes can be observed in the field, it
means that the weakest link is effective, and implies that the entire results
chain is viable. The outcome level represents the immediate demand-side effects
that can be observed in the field.
Further
along the results chain (i.e., input-output-outcome-impact), impacts can
be simply thought of as the longer-term effects that are propagated when meaningful
outcomes are sustained and spread throughout the environment. Our approach is
not called “managing for meaningful impacts,” however, because the time lag
from the achievement of outcomes until the appearance of impacts is too great
(on the order of 5 years) to provide feedback for management decision support.
In addition, it is expensive to measure impacts, and I argue that a formal impact
assessment is unnecessary in most cases as long as meaningful outcomes are continually
monitored and remain favorable.
The achievement of meaningful
outcomes is not certain because outcomes (and impacts) occur in the
environment, outside the direct control of management (and causality can be
nonlinear, unpredictable, interdependent, and intertwined at multiple levels in
complex environments). Success depends upon the ability of the organization to understand
the context for its service to the environment, then experiment to confirm “what
works now.” Favorable outcomes are verified by observing emergent behaviors
that are induced in the environment in response to the outputs on offer.
Managing for meaningful outcomes has
the following features and characteristics:
Meaningful outcomes are achieved in the environment surrounding the organization (using specific behavioral markers for effectiveness)
The environment is assumed to be complex at the start, thus causality may be unpredictable & intertwined (results chains involve conjecture)
Managing for meaningful outcomes is about inducing favorable effects in a system not under management control
Involves self-regulation of processes in order to uphold positive organizational values and reduce or eliminate negative side-effects
Intermediation services (which balance supply & demand) are performed by ‘the environment’ (including ‘the market’) utilizing a variety of benefit exchanges (financial & economic, social & psychological, environmental & spiritual) between relevant actors
Adopting this new management approach requires a major cultural shift to an experimental, self-regulatory, and adaptive culture
Let’s consider a real-world example
of managing for meaningful outcomes, this time from a World Bank-financed
program that I helped design. Bird Flu in Asia occurs in a complex environment,
where wild migrating birds acting as the reservoir for the virus seasonally intermingle
with domestic poultry to spread the disease. The goal of the World Bank-financed
program was to achieve physical separation between domestic and wild flocks to
interrupt the spread of the virus in participating countries. This is an
outcome level goal because uptake, adoption or use of cages was expected by
domestic poultry producers to achieve program success. If we visit the field during
program implementation and find that cages are being used for the containment
of domestic flocks, separation between the domestic and wild flocks has been
achieved and the intervention can be judged effective. The expected longer-term
impact of the program would be that Bird Flu does not return, assuming the
outcome-level effects continue to be sustained over time. In this example, the
key to success is outlining a results chain that specifies the exact behavior(s)
that must be induced on the demand side to qualify as meaningful outcomes, then
confirmation of the expected outcomes through direct observation of the key behavior(s)
involving cage use in the field once the outputs (i.e., cages) become available.
Why manage for meaningful outcomes?
It offers a
more meaningful way to manage, supported by theory & practice
It is equivalent to managing for organizational
effectiveness (the highest level of performance)
Since effectiveness can now be verified in the field
under the new OFM model, it becomes the meta-goal for every organization (no
other goals needed at the top, as effectiveness is the highest good — both in
the short term & the long term)
Meaningful outcomes observed in the field provide
timely feedback for decision support (i.e., management of a portfolio of
offerings)
The new approach reduces or eliminates negative side-effects
through self-regulation (utilizing positive values) and by accepting
responsibility internally for waste reprocessing
This is true evidence-based management, where
causation is established by experimentation and direct observation of meaningful
outcomes in the real world.
Note
that organizational effectiveness is judged in the short term by confirming the
presence of meaningful outcomes in the field for a portfolio of offerings
(i.e., specific behaviors of uptake, adoption or use within the defined results
chain for each offering). Longer term measures of effectiveness are reflected
at the impact level as meaningful outcomes accumulate over time, allowing for
spread effects to take hold throughout the environment (integrating
instantaneous outcome-measures of effectiveness over time).
How
to manage for meaningful outcomes?
Start with… “the meta-goal of the organization is to
be effective within its chosen environment” (by achieving meaningful outcomes
and sustaining or improving the system as a whole)
Develop a portfolio of offerings (one at a time) to
serve the environment while conforming to the organization’s core competencies,
quality standards, and positive values (Chandler 2017, 132-133)
Pilot test to verify the effectiveness of each
offering on a small scale by observing the expected demand-side response(s) consistent
with its results chain hypothesis (i.e., verify that the meaningful outcomes —
the behaviors of uptake, adoption or use — are being observed in the field)
Utilize observations of outcome-level results in the
field to provide management decision support to scale up the production of successful
offerings where desirable and feasible
For
me, the technology involved in managing for meaningful outcomes is equivalent
to the technology of Management by Positive Organizational Effectiveness that I
have described in my 2017 book, Become
Truly Great: Serve the Common Good through Positive Organizational
Effectiveness (Chandler 2017). It should be noted that improvements in effectiveness
are additive across the portfolio due to cumulative benefit exchanges, but
efficiency improvements achieved in individual parts of an organization can
come at the expense of the efficiency of the organization as a whole (Chandler
2017, 14).
An
often-quoted view among organizational consultants and practitioners is that
“efficiency is about doing things right, while effectiveness is about doing the
right things” (Drucker 1966). Peter Drucker meant this statement to refer to
the effectiveness of executives, not their organizations. When it comes to
organizations, efficiency experts proudly declare that efficiency is the domain
of doing the right things right the first time and every time. Effectiveness,
on the other hand (as discussed today), is something entirely different. It is
not about doing anything within the organization, it is about achieving
something outside of it (i.e., meaningful outcomes).
Under
our new approach to management, the meta-goal of every organization is the
same, that is, to be effective within its environment (while sustaining or
improving the system as a whole). The approach focuses the attention of the organization
on its external interface and it is encouraged to be in-tune with the immediate
and future needs of its environment. The focus on meaningful outcomes improves
the way that the outputs are designed and delivered because internal actors
come to realize that outputs are waste without the behaviors of uptake,
adoption or use associated with the achievement of meaningful outcomes.
CONCLUSION
A
focus on meaningful outcomes offers significant benefits for projects,
programs, and organizations more generally, as well as the wider world. The
traditional approach to management (still commonly in use) is based on a largely
meaningless input-output model where efficiency is the highest
good. In such a model, the organization extracts resources from the surrounding
environment, internally processes the inputs to product outputs, and returns to
the environment the outputs it produces and the waste products it has created. While
this model has been historically important, it generally fails to provide meaningful
and timely evidence for management decision support, and largely ignores any negative
side-effects on internal actors and the negative side-effects that affect the environment.
As long as efficiency is the highest good, as in the traditional input-output
model, principles of humanistic management and environmental conservation will fall
victim on the altar of efficiency. Unless changed, the traditional management model
will continue to imperil the world we live in.
Going
forward, management technology needs to adopt a more meaningful input-outcome
model that values positive organizational effectiveness as the highest
good. This would provide meaningful and timely evidence for decision support of
a portfolio of offerings, while sustaining or improving the health of the
organization and its environment as a holistic system. In the new approach, an
organization achieves effectiveness when its outputs induce meaningful outcomes
in the environment in line with one or more defined results chains. This approach
offers demand-side validation of an organization’s portfolio of offerings
(whether in business, government or nonprofit) and thus provides verification
of organizational effectiveness (the highest level of performance) by direct
observation in the field. This is the first approach to do so. The new approach
provides a verifiable concept of organizational effectiveness that creates a
capstone to organizational theory and offers a more unified (and parsimonious)
approach to the field.
Traditional management practice can be characterized as “managing for outputs, valuing efficiency as the highest good.” Very little meaning is derived from the successful delivery of outputs alone, however, because the process remains largely disconnected from considerations of environmental context and environmental response. The new approach advocated here can be characterized as “managing for meaningful outcomes, valuing positive organizational effectiveness as the highest good.” It offers a better way to manage by creating a path to more effective organizations, a more meaningful technology for human accomplishment, and a better world.
Charles G. Chandler, Ph. D.
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Kim S. (2005). “Organizational Effectiveness.” In Great Minds in Management, edited by K. G. Smith and M. A. Hitt,
304-330. Oxford University Press: New York, NY (USA).
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Charles G. (2015). “Organizational Effectiveness: Replacing a Vague Construct
with a Defined Concept.” Academy of
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Charles G. (2017). Become Truly Great:
Serve the Common Good through Management by Positive Organizational
Effectiveness. Author Academy Elite, Powell, Ohio (USA).
Doerr, John
(2018). Measure What Matters: How Google,
Bono, and the Gates Foundation Rock the World with OKRs. Penguin Random
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Peter F. [1954/1982] (1993). The Practice
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Peter F. (1966). The Effective Executive.
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(1977). “Organizational Effectiveness: An Overview.” In New Perspectives in Organizational Effectiveness, edited by P. S.
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Francisco, California (USA), 236.
Scott, W. R. (1987). Organizations:
Rational, Natural and Open Systems (2nd ed.). Prentice Hall: Englewood
Cliffs, NJ (USA).
Suchman, Mark C. (1995). “Managing Legitimacy: Strategic and
Institutional Approaches.” Academy of
Management Review, 20(3), 571-610.
Taylor,
Frederick Winslow [1911] (1998). The
Principles of Scientific Management. 1998 edition. Dover Publications: Mineola,
NY (USA).
In this episode, I interview Isaac Tolpin, who is a serial entrepreneur and CEO of ConveYour.com, a micro-learning platform. We cover several topics related to the role of training in organizations. Isaac is a knowledgeable observer in the sector and provides an interesting perspective on several training issues.
